Auditors’ decision-making under going-concern uncertainties in low litigation-risk environments: Evidence from Hong Kong

This study examines the audit opinions issued by auditors in a low litigation-risk environment at a time of high economic uncertainty – that of Hong Kong in the period immediately after the Asian financial crisis of 1997. Empirical research using United States data has shown that, contrary to professional guidance which restricts the issue of “disclaimer of opinion” only to situations where existing uncertainties prevent the auditor from forming an opinion, auditors tend to use the “disclaimer” report (in the going concern context) to signal more extreme client firm’s distress. In the high litigation-risk environment of the US, researchers have attributed this tendency to the idea that “disclaimer of opinion” reports are used by auditors to provide some protection against potential legal liability. The results of this study provide evidence that, even in the low litigation-risk environment of Hong Kong, auditors still use “disclaimer” reports to signal more extreme client firm financial distress. Thus, the maintenance of a high litigation-risk environment does not appear to be a necessary pre-requisite for high quality audits.     

After VaR: The Theory, Estimation, and Insurance Applications of Quantile-Based Risk Measures

We discuss a number of quantile‐based risk measures (QBRMs) that have recently been developed in the financial risk and actuarial/insurance literatures. The measures considered include the Value‐at‐Risk (VaR), coherent risk measures, spectral risk measures, and distortion risk measures. We discuss and compare the properties of these different measures, and point out that the VaR is seriously flawed. We then discuss how QBRMs can be estimated, and discuss some of the many ways they might be applied to insurance risk problems. These applications are typically very complex, and this complexity means that the most appropriate estimation method will often be some form of stochastic simulation.     

Delivering Public Health Care Services: Substitutes,Complements, or Both?

In this article we investigate how the availability of public health care providers increases (complement) or decreases (substitute) the likelihood of having public or private health insurance. The probability of each of three insurance alternatives (uninsured, Medicaid, private insurance) is modeled as a function of the availability of public programs in the respondents'community along with individual characteristics including family income, health status, and family structure. Using population-based estimates, public hospitals are associated with a crowd-out rate of 3.5 percent to 8.6 percent. Federally qualified health centers were associated with a net complementary effect (additional public insurance take-up) of 7.1 percent. (JEL I11 , I18 , I38 )     

AIRLINE SERVICES AND METROPOLITAN AREAS IN THE ASIA-PACIFIC REGION 1970 - 1990

This paper looks at the ways in which air transport has affected economic growth in metropolitan areas in the Asia-Pacific region. Two primary influences are identified: level of service to a particular airport; and local airline industry activities. The paper examines the former by means of an historical overview of the factors influencing the development of economic 'control centers' in the Pacific Rim. The level of a service at an airport in the region has depended greatly on local economic activity, as well as on geography, aircraft technology, and intergovernmental regulation. Data on non-stop international flights in the Asia-Pacific region for 1970, 1980, and 1990 are used to document the emergence of major hubs such as Hong Kong, Los Angeles, and Tokyo. It is argued that as technology advances, services will become even more concentrated in a few places, causing further congestion and strain on infrastructure capacity.     

EQUILIBRIUM GROWTH IN A MONETARY ECONOMY WITH TRANSACTIONS COSTS*

The paper describes a dynamic general equilibrium monetary economy with technological primitives that are consistent with the possibility of asymptotic equilibrium growth. The paper focuses on the relationship between equilibrium financing constraints on investment goods, transaction costs and economic growth. A generalized growth condition is derived that involves both monetary growth rates and transaction costs. The condition is used to show that (i) although inflation taxes can potentially exert a negative influence on long-run economic growth, these growth effects cannot in general be arbitrarily large; and (ii) for some monetary growth rates, money is superneutral in contrast to the models of Stockman and Abel. Numerical work indicates that although the welfare and growth effects of decreasing nominal interest rates from a benchmark are large, the costs associated with raising nominal interest rates from benchmark are not.     

Urban disamenities and the measure of economic welfare

A labor market model is used to estimate elasticities between various disamenity factors of urban areas and the wage in those areas. The results are used to calculate a correction to the personal income (PI) data for use in the construction of an index to be used as a measure of economic welfare. The labor supply equation of the model includes some population-related variables which Tobin and Nordhaus have hypothesized represent disamenities of urban living. The labor demand equation is derived from a production function which includes a measure of agglomeration economies. A two-stage least-squares regression analysis provides results which indicate that the hypothesized factors are actually amenity factors. The resulting correction to the personal income data is thus an addition: Economic welfare is higher than that indicated by the PI statistics.     

Pricing of related products by a multiproduct monopolist

This paper examines the pricing behavior of a multiproduct monopolist (MPM). For a firm selling two products, the profit maximizing price of a particular item is found to depend upon its marginal cost, the own and cross-price elasticities and the budget shares of both products. Conditions are identified under which the price charged by a MPM will be greater than, less than, and equal to the price charged by an otherwise identical single product monopolist as well as the circumstances under which it is profitable for a MPM to utilize one product as a loss leader.